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SEC Staff Experiences Uptick in Revenue Standard Implementation Questions

As public companies prepare to implement Accounting Standards Update No. 2014-09, Revenue From Contracts With Customers (ASC 606), they are increasingly turning to Securities and Exchange Commission (“SEC”) staff members for implementation guidance. It is being reported that submitted questions concerning the Financial Accounting Standards Board’s (“FASB”) revenue recognition standard increased by one-third last year, largely due to public companies needing assistance with financial reporting.

One question submitted to the SEC involves revenue from credit cards. A company asked for guidance on its decision to record revenue from interchange fees that a merchant’s bank pays to the cardholder’s bank. Speaking on the matter this week at the American Institute of Certified Public Accountants’ National Conference on Banks and Savings Institutions, SEC Associate Chief Accountant Rachel Mincin said the SEC staff agrees with the company’s interpretation.

In response to a question involving how costs of credit card rewards programs are presented, Mincin added that the SEC does not oppose the continuous presentation of rewards’ costs as a reduction in the line item containing interchange income. She believes it is important to banks in how they disclose costs and how they view such costs as a drop in interchange income, not operating expense.

Mincin’s remarks were part of her speech at the American Institute of Certified Public Accountants’ National Conference on Banks and Savings Institutions last week. During the speech, she also announced the SEC staff’s plans to plans to continue using submitted questions and its responses in public presentations. The approach is aimed to assist financial reporting professionals who are dealing with similar questions.

Public companies must implement the FASB’s revenue standard beginning in 2018.

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